European Wealth revises charging structure to lift financial planning arm

Added 25th August 2016

European Wealth has announced it will alter its fee structure after its financial planning arm saw disappointing turnover and the overall group reported losses in the first half of the year.

European Wealth revises charging structure to lift financial planning arm

Due to a “noticeable preference” among new investment management clients for all-inclusive fees as opposed to traditional charging structures, European Wealth said it intends to scrap its current framework.   

The announcement was included in the wealth manager’s interim results, which revealed the group had lost £0.5m before tax, 25% higher than last year’s £0.4m loss.

Its European Financial Planning unit endured a “challenging six months” in particular, which saw a short-term reduction in new business and disruptions as the group integrated newly acquired businesses, ISM and Bells. 

Although the financial planning business’ revenue grew by 11.8% to £1.7m from the previous year, the acquisitions made in the second half of 2015 accounted for £0.46m of the total turnover.

Despite this lacklustre performance, EFP saw a 79% increase in recurring revenue to £1.34m, which the group emphasised was imperative for sustaining healthy cash flow. And the firm remained confident EFP would see a recovery toward the latter half of 2016.

The investment management division, on the other hand, delivered £2.67m in revenue (a 17% increase) and significantly increased its funds under management in the first half of 2016 through organic growth. In particular, the fixed interest team, which the firm has been growing in the last 18 months through client facing staff hires, provided a boost to FUM.

European Wealth’s total FUM also showed improvement from the previous year, expanding by 29.6% over the last 12 months to £1.4bn.

While the second half of the financial year is riddled with uncertainties stemming from the US Presidential elections and fallout from the UK's EU referendum, group chief executive John Morton said the group would continue to look for new ways to expand.

“The first half of the current year has seen an improvement in the trading performance of the group due to the integration of the three acquisitions completed in the second half of last year together with the benefit of a reduction in the ongoing cost base of the group," he said. "We expect the group to continue to improve the underlying trading performance into the second half of the year. Any growth in the funds under management will have an impact on the financial performance of the group."

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